BiggerPockets Money Podcast - 364: Divorce: The Biggest Marriage and Money Mistakes to Avoid

Episode Date: December 19, 2022

Everyone makes financial mistakes, even those that we trust with money the most. Rachel “Money Honey” Richardsto many people online is the epitome of someone who has their finances locked down. She grew a massive real estate portfolio in her twenties, hit financial freedom before thirty, and has written bestselling books that others use to increase their financial acumen. And although Rachel still is a financially free money nerd like no other, her recent divorce changed most of what she knew. Through a few simple mistakes, Rachel’s recent divorce dragged on longer, cost more, and left more up to chance than she would have liked. After going through the pain, struggles, and anxiety of leaving the marriage, Rachel wants everyone, whether single, dating or married, to not make the same mistakes she made. These mistakes are often small, and can be easily overlooked, but making them could be deadly to your finances and allow an unplanned divorce to bury you. But this isn’t all advice on what to do before or during a divorce. Rachel shares personal advice on red flags you should look for when starting a relationship, how to separate your finances so you keep what is yours, and why overlooking a prenup can be one of the worst moves to make when starting your marriage. No one plans for a divorce, and Rachel didn’t as well. So happily ever after or not, these life-saving moves are ones you should be thinking about making. In This Episode We Cover The “misaligned vision” that led to Rachel and her ex-husband’s divorce Red flags to watch out for and an instant sign that a relationship may not work out Losing 50% of your real estate portfolio to divorce and how to protect against it happening again What most couples get wrong about marital assets and how they’ll get split during a divorce  Rachel’s four biggest money mistakes that you should NEVER make when married The trust cost of divorce and how much Rachel had to pay to separate And So Much More! Links from the Show Find an Investor-Friendly Real Estate Agent BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Mindy's Twitter Listen to All Your Favorite BiggerPockets Podcasts in One Place Apply to Be a Guest on The Money Show Podcast Talent Search! Subscribe to The “On The Market” YouTube Channel Listen to The “On The Market” Podcast: Spotify, Apple Podcasts, BiggerPockets Check Out Mindy’s 2022 Live Spending Tracker and Budget Prenups, Projects, Prolific Spending, and Planning for 2022 w/ Carl & Mindy Jensen Why You’re (Probably) Wrong About Prenups Click here to check the full show notes: https://www.biggerpockets.com/blog/money-364 Interested in learning more about today's sponsors or becoming a BiggerPockets partner yourself? Check out our sponsor page! Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast where I interview Rachel Richards about divorce, splitting significant assets without the benefit of a pre-nup, and what happens afterwards. But here is where I made mistakes. Again, each party gets to keep their own pre-marital assets. So any savings I had before the marriage, I get to keep. Any retirement accounts amounts that I had before the marriage I get to keep. But the growth in those retirement accounts during the marriage, that's a marital asset. So first of all, mistake number one is that, and I can't even believe I'm like saying this out loud because now it seems so obvious. I combined our accounts prior to marriage.

Hello, hello, hello. My name is Mindy Jensen and I am hosting the show Solo today. I am here to make financial independence less scary, less just for somebody else, to introduce you to every money story because I truly believe financial freedom is attainable for everyone, no matter when or where you're starting. Whether you want to retire early and travel the world, go on to make big-time investments in assets like real estate, or start your own business. I'll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams. Today, I'm talking with Rachel Richards. You may know her from

Bigger Pockets Money Episode 317 and from her books, passive income, aggressive retirement, and Money Honey. Before we bring in Rachel, let's take a quick break. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life

easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code Pockes. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place, so every decision actually moves an needle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code pockets at monarch.com for half off your first year. That's 50% off

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go a little bit more personal. In fact, we're getting really personal with Rachel today. We're talking about divorce and the biggest financial lessons she learned while going through one recently. Rachel, welcome to the Bigger Pockets Money podcast. Thanks, Mindy. I am excited and nervous to be here today. Well, I don't really bite.

So we're going to just have a conversation because unfortunately, you are not alone in this journey. And I think that there's a lot of people out there who may feel that, oh, I'll just stay because I don't know what to do. Or love conquers all. I'll just give it another go. And as you just said, love doesn't always conquer all. And sometimes the divorce is the best choice for all involved.

So let's talk about what happened. You and your ex were together for, what, seven years? And I mean, you talked about him on your BP podcast. You built your rental empire together. Why did you get a divorce? Yes. So this wasn't sudden or unexpected. I think the best way I can explain it is that we wanted different things out of life.

And it didn't start that way. When we first met, I had this very strong vision of building a real estate. portfolio and becoming financially independent and quitting our jobs and traveling the world. And my ex seemed to like that. You know, he jumped on board. And we started out as a team working towards that. And I talked a lot about that on my Bigger Pockets Real Estate episode. But at some point, I think he realized that that is not what he wanted.

I think he wanted to pursue his career, which is fine. I do wish he had figured that out sooner, but that's not what happened. So he sort of stepped back and I was doing most of it on my own. I was managing the rentals. I was planning for a future. I was handling our finances and taxes and investments. I was building these passive income streams and this became exhausting for me. And I felt that he was angry with me that I wanted to continue to drive forward and that I had these goals. And there are, you know, there are many other big important reasons why we didn't work. work out. There were family issues. There were problems we try to work through in therapy. But for me, I really think that the misaligned vision is what it boils down to. Being on the same page can be really, really helpful. And when you're not on the same page, that doesn't necessarily mean that either of you is wrong. You're just different. And there's a lot of people who aren't going to be on the same page as you. But it seems like when one of you wants to travel the world and one of you

definitely doesn't want to travel the world, those are giant differences. It's not like one of you wants to travel the world all the time and one of you only wants to travel 10 months out of the year. Like those are more compatible goals or more like doable, like more, what's the word? Compromisable, but like totally yes and totally no are going to be difficult to compromise on. One of you is going to have to give up what you wanted. And that's hard. I mean, how old are you now? I just turned 30 this year.

Okay. So that's, I mean, that's a long time to compromise and give up everything you want and be essentially unhappy for the rest of your life because someone else's vision changed so dramatically. Yeah, I think that's true. And I, you know, I really beat myself up for a long time thinking. You're married and you're supposed to figure it out, right? That's what married couples do. You're just supposed to find a way. And I kept thinking, I just need to try harder. And I did for a long, long time. But the thing is, there's just some things that can't be overcome. When two individuals want two different things out of life, that's not something that can necessarily be fixed. And it took me a long time to accept that fact and to realize that there was another option. And that option was getting a divorce. So I know the divorce was not, the divorce didn't go the way that you wanted it to go. I mean, what does really? Like who comes from their divorce is like, yes, I got everything I wanted.

Like that never really happens. But can you shed some light on what you didn't think went your way? For sure. So, God, I'm going to get emotional already. This is an emotional topic. I'm sorry. This is not like, yay. Yeah.

This isn't a happy, fun topic. and that's okay because sometimes you have to discuss not happy, fun things. I was hoping for an amicable divorce for sure, and my divorce felt the furthest from amicable that I could imagine. And that's because hurt people want to hurt people. And I felt we had these big looming problems that had been present for years, not just the things I touched on, but a lot more than that. And things really escalated the last six months of our months.

marriage. During that time towards the end, I feel like we both messed up big time. We both unintentionally hurt each other in many ways. And I own up to my part in that. But I think the difference is that despite anything he had done up to that point that hurt me, I just wanted out of the marriage. Whereas he looked at my actions and from the moment I asked for the divorce, it just seemed to me like he wanted to keep inflicting pain or get back at me or blame me or something. My friend's dad told me and something I laughed about almost the whole time is, you know, I was 29, 30 at the time. And I was like, I can relate to my friend's parents more than my friends now because my friend's parents have been divorced and I'm like, I'm so young so I'm like talking to

my friend's parents. But my friend's dad told me, people will always say you don't know someone until you marry them. But that's not true. You don't know someone until you divorce them. And I have found that that is very unfortunately accurate. So I've had to find a lot of empathy. I'm not bitter. I'm not resentful. I'm not angry. Or if I do have moments of anger, it's really because I'm hurt still. But I've had to find empathy that that was his coping mechanism. It was easier to hurt me and blame me than to accept that we weren't right for each other. Or to except that maybe it wasn't anyone's fault or that we never should have gotten married because that is a hard pill to swallow.

Okay. So with the benefit of hindsight, do you see clues that maybe it wasn't going to work out now that you can look backwards? Yes. And I've, so I've been in therapy since February, since, you know, months before I even asked for the divorce. And I struggled so much because I thought, well, how could I have seen? this coming. And she told me, I bet if you think really hard, there were signs that were there

very early on, that something was wrong, you know, that he would have ended up treating you this way. And I did. Once I really started thinking back about it, there were clues early on that I overlooked and that I ignored. And so one thing I've been working on now with my therapist is, hey, here's how to recognize these red flags early on in other relationships. Or if I do decide to start dating, again or get into another relationship. So we've been working on that and that's something that's, you know, very important for me now because that was a big mistake that I made. What is something that you could have done differently or what is something that someone who's

listening to the show now can do to audit their own relationship to truly make sure that they want to be in the relationship that they're in? I read this quote or something on Instagram, and I know it's like you don't take advice from quotes on Instagram and TikTok videos, but some of these things are really helpful, okay? So what it was was like it said the first red flag that comes up or the first problematic behavior that comes up in the relationship will be the reason you end up breaking up later. And I think that's a very powerful statement. It's not always true, but I think that's a very powerful statement.

it's something worth considering. So if you get into an argument or whatever, whatever it is, the first thing that comes up in your new relationship, the advice I would give to you and that my therapist has given to me is to pause. Okay, don't just resolve the problem, move on. But pause and really understand, you know, why did that make me uncomfortable? Has that behavior been adequately addressed? Is it a temporary solution? And then pay attention to whether that behavior comes back up. Because either that's something that your partner has addressed and that's it, or if it comes up again, it's now a pattern.

And something my therapist told me is if it's a pattern, it will keep continuing. It's either been resolved once and for all, or it's a pattern and it will keep continuing. And at that point, you have to ask yourself, do you accept this pattern? Can you accept that and deal with it? or the only other decision is to break it off and move on with your life. That's hard to do. I'm going to let you know right now that that is incredibly hard to do, especially when it's just one thing.

It's, oh, it only happened once or it only happened twice. It's so easy to overlook it, especially when you're in the love bubble and everything else is fine. Or there's a couple other things, but he's mostly great or she's mostly great. I want to make this clear. This is not a man bashing episode. This is a, you were in a relationship with a man. So it's coming out as, you know, this is, this is what his problem was.

But this isn't a, I disagree with all men. I hate all men kind of episode. But this is definitely something to think about. You know, if you're listening to this episode and you're thinking about your own relationship and thinking, ooh, I'm feeling seen, it's, you know, you should explore that a little bit more. And I'm not saying that you need to get a divorce. I'm saying you need to explore your relationship.

Relationships can be healed. They can be repaired sometimes, but sometimes they can't. And that's where we're at now. And I'm sorry that that happened. Thank you. And yes, I agree. This is just relationship advice. It's not about hating men.

I love men. And I think there are good men out there. The pattern thing can be so hard because, you know, I mentioned there were family issues. And the first time this issue happened was right after we got engaged and we went through therapy to resolve that issue. And I was like, great, that's been resolved. And then the next time this issue came up in a big way was years later. So I didn't recognize it was a pattern at that time.

I identified it as a new issue. And so when my therapist helped me recognize that it was a pattern, and she told me here, you're only two options. I was like, that's, or is there not another? Where's the third option? Because these options suck, lady. But yeah, you just, you really have to pause, you know, don't overlook things. Don't rush past things.

Pause and feel and understand whether something is a real problem or not. Well, let's talk about real estate. you are known for your real estate and you had at 1.38 doors, how was your real estate impacted by the divorce? Great question. So in our divorce, we actually only started with five units that we had to divide. And that's because we sold most of our units last year in 2021. And that was not divorce-related. I've explained, you know, kind of why we did that on my Instagram so anyone can go there. But we started with five units this year. We had two single family houses in Kentucky, a duplex in Kentucky, and then a big single family sort of boarding house in Denver. So that's what we had.

Now, there were three ways that my real estate was impacted by the divorce. Number one, we were both under a court injunction to do many things, to not spend more than we would normally spend. We also cannot move, transfer, sell, invest any of our assets. or money. So for seven months during my divorce, yes, for seven months, I was not legally allowed to invest in rental properties or syndications. But that's something you would normally do. I know. Well, but yeah, but the whole point is we can't be making moves on our assets. That's going to impact how we split our assets. So I can't tie up our funds and do something without his, you know, being on board, which was so annoying because I'm, I'm this big, you know, real estate investor

and coach and I have programs and then I'm teaching people and in the meantime I can't even do it myself. So it was fine. It was just more of a nuisance. And then number two, we had a tenant move out in April and another one later in the summer. And both of these were our single family rentals. My ex refused to agree to put new tenants in these properties. He forced us to keep them vacant for months. And we lost thousands and thousands of dollars this year in our real estate portfolio because

of that. And then number three, we ended up deciding to sell in the mediation and at the end of the divorce, we ended up deciding, here's how it all played out. We ended up deciding to sell the two single family houses that had been vacant. I kept the duplex in Kentucky, and he kept the single family house in Denver. So, and then when you sold the two single families, did you just split those evenly? Yeah, and that's still happening. And so I went from 38 doors to two in a span of a year. So I've joked about it with my friends because, as you know, I gave that speech at Bicker Pockets Conference, how to scale from zero to 38 doors in under three years. And so once this all played out and I realized how the assets were going to be divided, I texted my friend group and I was like,

like how to downsize from 38 doors to two in one year, get a divorce, follow me for more real estate investing advice. Not really. I mean, we sold most of them. But I do feel a little self-conscious because I just hope that my followers and students don't think it takes away from my credibility. I mean, I don't think it does. I still have achieved what I've achieved.

I still have the knowledge and expertise and resources and network. And I do want to build my portfolio back up a little bit more next year, not to prove anything, but because I like real estate and the financial benefits and I want to have more properties. But some people will look at my trajectory and think, who are you to teach this stuff when you now only own a duplex? But that's okay. They're not my people. So I think I just mentally need to let that go. That's a really good point.

They aren't your people. If they can look at your current portfolio, in quotes, and see that you are, only have two doors and therefore don't know what you're talking about, they're not going to listen to you anyway. So they're going to look for reasons to not listen to you. There are plenty of people out there who will see that you did at one point have 38 doors. That's a lot of doors. Yeah. And I like all the syndications now anyways. I'm in nine syndications. I'm going to keep investing in syndications. I could do what other people do and say, oh, I own a thousand 65 Dors because I'm in nine syndications. I guess I could do that. You could do that. I think that's

disingenuous to say that. I agree. And that's why I don't. That's so misleading. I think that saying I am part of nine syndications is far more honest with the actual counting. But we've had a conversation about that anyway. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make

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Get more with Northwest Registered Agent at Northwest Registeredagent.com slash money free. What about your business? You had Money Honey, Honey, Rachel is, I mean, I don't look at Money Honey Rachel and think, oh, that's Rachel and her husband. I think that's Rachel only. So was that impacted by the divorce? My business was definitely impacted in multiple ways.

It was impacted in terms of profit. I'm down about 60% in profit year over. over a year. And this was one of the most stressful parts of my divorce. It was June when I got an email from my attorney. And he notified me that my ex wanted to have my business valued. Now, there were only a couple moments in my divorce that I just felt like the world was going to end. You know, I felt the world was collapsing around me. And that was one of them. I mean, I nearly just screamed. I just felt this whole time, I just wanted to do what was fair and reasonable. My ex-husband was making a large salary, over 200 grand at the time in cybersecurity.

He had full health benefits, 401K, stock options, all these things. So that was his thing. This was my business. So I figured, let's split the rentals. let's split all of our investments in money 50-50, and that's that. So when he chose to come after my business, I was shocked. He didn't have anything to do with it. He did not make any financial contribution. And I made sure of that. I made sure not to ever be financially dependent on him when I quit my job in 2019.

I had already replaced my own income from our rentals, from my half of the rental income and from my book royalties. So I was not dependent on his salary. at any point. And he made no intellectual contribution to my business at all. But that's what he did. And he could legally. He decided to get a business valuation. Oh, you said legally. That sounds like we're about to talk about a pre-up or lack thereof. Yes. So and before we get into that, I want to talk, I want to just say a little bit more about what the business valuation means and how that sort of impacts the divorce. Yeah, yeah, let's talk about that. Okay. So when we have to divide our assets,

just so everyone's aware of what that really means. So if anyone's listening and you own a business, whether it's a rental property business, a side hustle, you're an author, like any kind of business. When we have to divide our assets, we have to agree on a value for everything. So unless something belonged to us prior to marriage, making it a premarital asset, then everything else, get split 50-50. Only the premarital assets are protected. So him putting a value on my business meant it would get split 50-50. It meant another line item on my side of the balance sheet, which meant I would have to buy him out of it at 50 percent. And so he would get to offset it with more. He would get to maybe walk away with another rental property because of that or another syndication

or way more cash. So that's how it works. I was so scared about my business valuation. I lived in fear for months and months what it would come back as. So let me just say this one more time. Legally, my ex was entitled to 50% of my business because we were married, period. There is nothing I could do about it. And I remember telling some of my close friends about this, and I remember telling you about this Mindy at one point, and you were just, you were so angry for me. And you were like, how is that, how is that possible? You know, can't something be done? And I was like, no, nothing can be done. And I was like, that, you know, that's when I said, the only thing that could have been done is if I had a pre-up. And so that's where we can talk about pre-nups.

Okay, before we talk about the pre-up, let's talk about the business valuation. Now, this sounds like a legal process or there's a formal procedure for getting this done. You give your financials and your business information to a third party. And they, they, evaluate it, you can't just say, hey, it's worth a dollar. Right. Yeah, we had to hire a joint expert, somebody that we both agreed on. And this is normally a CPA, somebody that has done business valuations before. So that is who we hired to do it. It was a very frustrating and long and tedious and expensive process that cost us somewhere between $5,000 and $10,000. And yes, it was expensive. And, you know, I'm obviously hoping that the business,

valuation is going to be low because again, I'm going to have to pay, buy him out at 50%. So I got the valuation back on October 7th, 10 days before our mediation. And the valuation was actually lower than I thought it would be. It was so low that I cried happy tears. And I remember thinking, I have cried every day for six months and I'm actually crying happy tears right now. And I think I was crying and laughing like a crazy person because it was. was just so ridiculous and absurd that we'd spent all this money on this business valuation for

what? It just felt so pointless. So with the business valuation, that's an official thing. So when it comes in low, obviously you're happy. And can he protest it? Or is that just, oh, I guess it's worth a dollar now? He could. He could protest it. He could have had an individual expert, his own expert CPA, have a rebuttal report. But we didn't have enough time to do that before the mediation. And I could have done the same thing. I actually did have a rebuttal expert hired that, you know, that he didn't know. But I had someone prepared and hired and ready to take that report and just rip it to shreds in case it came in really high. So I was prepared to have somebody come in and say, actually, no, it's worth way lower. But I didn't need that person to do that. Okay. So was it always

a given that you would be able to retain ownership of this business? Pretty much, yes, because there's really no world in which a judge would have looked at everything I had contributed and said and taken my business away from me. So it was pretty clear cut that I was going to be the owner of the business. It's just that I would have had to buy out my ex-husband. Does that make sense? Yeah. No, that makes sense.

I just want to make sure that it was never on the table that he could continue to help you run it by not doing anything at all. and continue to get 50% like he didn't have the option to say no I don't want you to buy me out I want to continue to be 50% owner no no that that would not have happened in my case it might have it could happen in a husband and wife

or husband and husband or wife and wife case where they both did contribute to the business in terms of intellectual contribution or financial contribution but because that wasn't the case for us I was the rightful owner I just had to buy him out of it So he got 50% of your business. Was everything split 50-50?

So only marital assets are split 50-50. And again, marital assets are anything that are acquired during or gifted to the marriage. So anything that either of us had before the marriage that we brought into the marriage, that was protected. But here is where I made mistakes. I made a lot of mistakes. And we're going to talk about many of these mistakes. Again, each party gets to keep their own premarital assets. So any savings I had before the marriage, I get to keep. Any retirement accounts amounts that I had before the marriage I get to keep. But the growth in those retirement accounts during the marriage, that's a marital asset. So first of all, mistake number one is that, and I can't even believe I'm like saying this out loud. Because now, because now,

it seems so obvious. I combined our accounts prior to marriage. And I feel so stupid ever doing that because I did not understand the repercussions at the time of doing that. I just, and I didn't have any doubt in my mind at the time that we weren't going to work out, right? Because who has, who has a doubt in their mind when you marry somebody that you're going to be the 50%? But so that's what I did. I added him to my accounts prior to marriage. And because I did that, all of my banks and accounts were no longer separate premarital assets because he was now a joint account owner on them. So I took away my own premarital assets. And it wasn't much, it wasn't much. Thank goodness for that. But still, I took away my own premarital assets. And then he didn't add me

to his one investment account. So he had his protected premarital. And, investment account, but I took that away for myself. So that's, that's awful. So that's mistake number one. Another mistake is this. Because we were a team and I saw us as a team, right? When you're married, that's the healthy mindset to have. So there's nothing wrong with that. But what I did is that I didn't think it mattered whose retirement accounts we contributed to. You know, it's all going to, I figured It's all going to end up at the same pot at the end of the day. We're all going to withdraw from who's, it doesn't matter whose. So why did it matter?

And again, I can't believe how naive I was. So for years, and this was both before and during the marriage, for years, we were maxing out his retirement accounts, his HSA accounts, and not mine. And that's something I did. It's not like he was doing that or controlling that. That's something I did. And now his retirement retirements were already a lot. little bit larger than mine when we met because of our age gap, but not significantly.

But at the time of our divorce, he walked away with 250 grand in tax advantage retirement accounts. And I had only $53,000 in mine. So that was an enormous disparity and disadvantage that I did, that I created that mistake. And that was because they were his accounts prior to marriage. It's because I was contributing all of our combined funds and making sure we were, and we were maxing out his retirement accounts and his HSA accounts for most of the years we were married instead of mine. So his accounts grew so much more than mine did. Oh, okay. Yeah. Okay. And now in our divorce, I could have said, well, the retirement needs to be divided up evenly. I could have said that, but instead I chose to, that I wanted to walk away with the syndications instead of retirement assets. So that, so that is the way. it was negotiated, but again, I could have started things out. And if I had just had a different outlook and been more smart from the beginning, I would have had a way more even retirement situation right now. Does that make sense? I don't know if I'm explaining that well. Okay.

So then another mistake, and this one's not as big of the deal, but it's just something you don't think about. So another mistake, mistake number three, is that one of my ex's premarital assets was his truck. And when we got married, and this was like a nice Dodge ram, like a $50,000 car, when we got married, I did not think to put the title into both of our names. It was always in his name. But I sold my car two years ago, and we became a one car household. So that truck was both of ours that we shared. And when we first separated and he moved out, he took the truck, and he left me stranded in Denver. And so I had no car and no means to get around.

And there was nothing I could do because the title was in his name. So again, it's just you have to think about these things. You have to protect yourself. That's some of the mistakes with the way the marital assets were split and the way that things played out. Wow. Yeah, that's not something that you would think about because it's a truck. What do you think about?

Yeah. You don't think about it until it's too late. Exactly. Oh. So if everything had been kept separate even during the marriage, would all of your money and earnings have been protected? No, definitely not. And I'm glad you asked because that's not how it works. Anything earned during the marriage is a marital asset.

It does not matter if it's put into a separate account or not. And that's actually a pretty big misunderstanding for most people. So again, the money you earn during your marriage is not protected just because, because it's put into a separate account. Once you get married legally, anything earned from that point forward is a marital asset, no matter which account it gets put into. The only thing that can protect you is a pre-nup. Which I'm assuming you didn't have. No. My biggest regret. I don't have one either. Well, I think you're doing well. I've seen you and Carl and you both are just the loveliest couple. I was so offended when he brought up the topic. I was like, if you bring you.

this up again, we're not getting married. And because I thought that it was a plan for a divorce. And we had, it wasn't until episode 301 of this podcast where we interviewed Aaron Thomas that my thoughts on prenups changed. It's such a great episode. If you are thinking about getting married, if you're listening to this and thinking about getting married, listen to that episode. It is not a plan for divorce. It is a plan for how your marriage is. going to work. And he gives some really great tips. He's got a book coming out about all of those tips, but he's not on this show today. I just want to make sure everybody listens to that episode. What was your stance on pre-ups before you got married? Well, clearly, I didn't think it was necessary.

Who needs one? We're in love. We're in love. We're going to be the ones that work out. We're special. And at the time we were engaged, neither of us had substantial assets. And our net worth was not significantly different. So I truly, I didn't think it mattered. You know, I did not think it was relevant. I did think about it. I just didn't think it was relevant. But first of all, that was just the case when we got engaged. By the time we got married, we had invested in rentals together. Our wealth had significantly changed. And I failed to ever reconsider the pre-nup situation. So that's, that's on me. That's my bad. You know, we combined our accounts. So I don't know why it didn't cross my mind again to reconsider a prenup at that point. Secondly, this is really the more important thing. You don't know

what business is you're going to start, what book you're going to write. And except I had already written my first book by then, but again, it didn't cross my mind. You don't know if you're going to start a real estate empire during your marriage. And that is what a pre-nup can protect. If I had a pre-up that said any books I write or any business I start related to that is much. mine and mine alone, we would not have been in this mess. And there is literally so much pain and stress and anxiety that we would have avoided had we had a pre-up. And that is the biggest mistake, the absolute biggest mistake I made. And now I firmly believe that everyone should have one. Why do you say that everyone should have a pre-up? Because we just, we have to look at

this unemotionally for a second. Pure, pure logic in mathematics. okay, which I know isn't nice, but 50% of marriage is end. And I'm not saying that from a bitter perspective. I'm saying that because those are the statistics. So let's just be realistic. And I never thought I would be in that 50%. None of us do. Never in a million years. But this is purely risk management. Okay, think of it as risk management. Your odds are 50%. So for example, Mindy, you have car insurance, right. Okay. It's not because you think you're going to cause an accident or that you're going to do something dumb. Like, you're not going to drink and drive or text and drive. It would be stupid. It's to manage the risk of other people. It's because it's smart to protect yourself just in case something

bad happens to you that you can't control. Right. You wouldn't enter into a business partnership without a legal contract outlining what happens if things go bad, you wouldn't enter into a real estate deal without a legal agreement in place with an exit plan. And now you're telling me you're going to sign a lifelong commitment without an exit strategy if things go south, which 50% of the time it will. So why are we protecting ourselves legally and financially in every circumstance in life except for marriage? We cannot control other people. So think of the things that are are outside of our control and a marriage. And I'm not saying any of this applies to my situation, but here are some examples. Someone becomes emotionally or physically abusive. Someone becomes an

alcoholic or drug addict. Someone cheats. Someone realizes they have a different sexual orientation. Someone wants something else out of life. People change. You can't control it. And then what are you supposed to do? Like you can stay the same person and uphold your vows till the day you die, but you have to manage the risk that someone could change in your marriage, and that is outside your control. And one more thing I have to say on this, because I know I'm very passionate about this. Here's the thing. You already have a pre-up. It's the one that the state gives you. You already have a legal agreement. It's the one that the state gives you, and I bet it's not very favorable. I bet it's not what you would want. So if you want to protect yourself, you better write up

the pre-p pre-up that you want and that you agree to, or else you are subject to the government's desires and whims. And take it for me, it is much better to come to a loving agreement now than it is defied over finances when there are too angry and hurt people. It is something you do out of love for the person you are marrying because you are smart enough to recognize that there is a level of risk. And so that is all. That is a great quote.

Thank you. that is it's much better to do it when you're all still friends it's thank you all get off my soapbox now but yes no no no you are here to share your experiences this was a really crappy thing that you went through and you are here today to share with everyone who is listening who might be thinking about it or in a relationship where they're starting to question what's going on, or simply just curious about what happens in a relationship when it ends. You're here to share your story so people can learn from you. And I appreciate that.

Now let's get into some nitty-gritty. How much did this divorce cost you? I just looked at the total the other day. But the thing is, charges are still coming through. I just got another $1,800 bill. But the other day, yesterday, my estimate that I came up with was $49,800. And that was mostly on attorneys. Mine so far has been $17,000.

I believe my exes were more expensive. There are things that we had to pay for like appraisals, business valuations. And again, there's still costs coming in. It's been a month, but we're still paying for things. But yes, $49,800. That's a lot of dollars. Well, I feel that we could have just mediated instead of hiring attorneys and we could have achieved the same outcome. And that is what I was hoping for in the beginning. And we could have saved a lot of money. We probably could have saved 35 to 40K. And I do think that's another mistake. It's not my mistake. I think that's my ex's mistake. But that's an option. You can mediate without having to hire attorneys at all. The attorneys are the ones that win in a contested divorce. Okay. Let's recap.

What do you think your biggest mistakes were? Well, I definitely just messed up overall. And from a financial perspective, I failed to protect myself. I fail to advocate for myself. And it's hard to say that with my background. It's just hard to admit that. I have a degree in finance. I'm a former financial advisor.

I'm a best-selling author. I teach people how to advocate for themselves. And if someone as smart and competent as I am screwed up this badly, what does that mean for everyone else? It scares me to think about, and that's why I'm on here sharing this. The one silver lining they got me through was knowing, you know, maybe there's a reason for my suffering. Maybe my mistakes will help someone else avoid this pain someday.

Maybe I have this voice and platform for this reason so that no one ever has to suffer in a relationship or marriage or divorce and then feel helpless the way I did financially and legally. So please listen to my mistakes and learn from them. So one of my mistakes combining accounts before marriage. Another one, contributing to his retirement accounts and HSAs and neglecting my own. Another one is not putting assets titles into both of our names, like his truck. And then the biggest mistake is not getting a pre-up, which would have protected my books and my business. Okay.

I'm going to stop you right there and say that nobody is perfect. and you're not allowed to beat yourself up because this is my podcast and I don't allow you to do that. So stop. Thank you. I could also say, hey, I don't know what you're doing wrong. Everything I do is perfect. Have you seen my budget? And everybody who has seen my budget is laughing hysterically because I mess it up all the time.

I think it makes it really human. I think it makes you really human. And somebody who is in a similar position who isn't a finance pro who is supposed to know everything. by the way, you can't know everything, we'll listen to this story and say, hey, maybe I'm not such a mess up because Rachel is supposed to know everything and she made mistakes too. So maybe I should stop beating myself up for these same mistakes that I made or for similar mistakes. I mean, how many people have a pre-up?

I would love to know what percentage of my listeners have a pre-up. I think it would be very low. I think that a lot of people are like us. I'm not going to get a pre-up. I have nothing to save. I'm not going to get a pre-up. I have, that's just a recipe for divorce or that's just planning for divorce. And we're going to stay together forever.

So there's no reason for me to get a pre-up. And I think that you're not even close to a loan in this scenario. I would be very surprised if 10% of my listeners had pre-ups. I think that they're not that common, even in this. particular scenario. They're common, I bet, amongst divorcees. You know what? I think they are. I absolutely think they are. But I think that my business coach, I was talking to him earlier this year and I was like, yeah, I'm never getting married again, you know, during one of my moments. And he was like, oh, you'll get married again just with a pre-up next time. And he's right. Okay. So on that same vein of not

beating yourself up, what did you do right? I did a lot of things. right. I was in the know regarding all of our finances. You know, I was the one that kept track of our accounts, our logins, our balances. I kept track of all of our monthly expenses and those were in my possession. So that was really great for me. We had separate and not joint credit cards, which I thought was helpful to just have my own personal credit card that, you know, he did not have access to. I chose a great attorney. I chose somebody logical who was not trying to pick fights to pick fights or spend unnecessary money. He did a great job advocating for me. One thing I'm proud of myself for doing is mediating and coming to an agreement at mediation, even though I felt it was far, far from fair.

I felt I walked away with far less than what I should have. And I was angry about that. that at first, but the other option, you know, if we didn't agree to something in mediation, that meant we had to go to court and go to essentially a trial, which would have been next year. That would have been 2023, and it would have been months and months, more delays, more costs. I would have continued to lack control over my finances, my real estate, my businesses, and now I'm able to move on a lot faster, and I'm able to make more money. And so giving that up was the best financial decision that I made. And I didn't see it at the time, but I see it now because I'm making more now.

I'm investing in real estate. I'm living my life the way I want to live it. So coming to an agreement and mediation, even though I felt it was totally unfair, I'm glad I did that. Yeah. That, let's see, let me gather my thoughts for a second because that was, that's pretty, pretty profound to realize so, I mean, this was just finalized, to realize so soon afterwards that, yes, I could have gone to court, I could have potentially gotten more money out of it, but then it would have cost me more time, more mental anguish, more everything in this prolonged, for what?

Like, how much more would you have really gotten? Like, hundreds of thousands of dollars more? it can be so like you want to win. I'm not going to let him win. I'm going to go there and I'm going to really stick it to him. And that like the maturity to just accept the mediation that's given to, you know what, I'm just going to do it and be done because then I can move on with my life. That's so profound and smart.

And I don't know that I would have been that profound or smart. So you're better than me. My dad helped me a lot. And, you know, he was just trying to build me up going. into mediation and he just kept saying, you know, you've already won. He can take everything and you've already won. And the thing I'm proud of reminding myself of is that that was true. He could have taken our entire marital estate, but what he could never take away is my ability to build it all back. He can't take away my knowledge, my drive, my passion. None of that

he can take away. He can't touch me, right? So he could have taken away a lot more, but at the end of the day, I still win. I can build it all back, and that will never be taken from me. Exactly. Now, you were talking and you said you had separate credit cards. Was that a conscious choice? Not really. I don't think it was unconscious or conscious. It was just something we had always done. We had joint credit cards for the business. I guess I don't know if it was even in the LLC name or both of our names, but we both had separate credit cards, but it was all paid out of our joint accounts. And we could see each other as or at least I had access to his because I managed all of the logins and all of the finances.

But I don't think he ever could really see mine or cared to. I would have given him my logins if he had wanted them. But yes, we did have separate credit cards. Emotionally, what was this process like? There is definitely no exaggerating that this was the darkest year of my life. and I do recognize that to say that is privileged because people have gone through a lot worse, and I'm lucky that I hadn't gone through anything worse. I have dealt with depression before, but this is depression, anxiety, and grief all at the

same time. And those listening that have lost someone or been through divorce will know you're also grieving because you don't just lose the person you love. You lose the entire life you thought. you would have. And it's not just a normal breakup, right? I lost my future, the whole life that I envisioned. And I lost my roommate, my best friend, my travel partner. And the worst freaking part is that I lost my dog. I haven't seen a picture or video of my dog, Chloe, in seven months, and I still cry about her to this day. So it is a tremendous amount of loss and coping that is truly unimaginable.

And then adding to that is the absolute horror of someone you love turning against you and hurting you, coming after you, trying to inflict pain month after month. And I still can't reconcile that. the fact that I feel like I don't know the person I married and what he was capable of. It was just shocking and bewildering and I've never felt so helpless in my life. And then keeping it together and trying to run my public-facing business because I have hundreds of thousands of followers. You know, I gave that Bigger Pocket speech on October 4th. That was less than two months ago in San Diego. And it's one of my proudest things I've done.

I had so much fun. I was surrounded by friends. It was clear to me that I made a big impact that day. And it was such a happy week during such a dark time in my life. And what people would never know is that two days later, I came back home. And I remember crying in my bed on and off for 11 hours straight. And I cried so much that my left eye swelled shut. because I was so depressed and it was just that was the hardest month. But I survived. And as you know,

my divorce was finalized about five weeks ago on October 21st. And that has been a huge relief, a huge weight lifted off my shoulders. I'm still not emotionally okay. As you can see, there's a lot of healing to do. I'm working with my therapist still. And despite the fact that I can continue to achieve a lot and hit big milestones in my business. I am still struggling. And that's okay. I do not expect to feel better overnight. You know, no achievement is going to lift the crushing weight of depression or lift the loneliness

that I still feel every night. But I do know that I will be okay. And that's enough for me right now. You will be okay. You will thrive and you will come out on the other side even better than before. Thank you. But getting through it sucks. It sucks.

And it's the slog that you have to do. Well, come back to Longmont. My girls would love to learn more about financial independence from you because they don't listen to me at all. Seriously, if you want to feel better about yourself, listen to my girls. Talk about how amazing you are. You're so sweet. I love your girls.

Take them. But seriously, you are doing a lot of good. You are teaching people how to change their financial lives. You're showing people that you can be a real estate investor. You can change your financial future. You're not stuck in whatever you, whatever circumstances you're in right now. You can change the future. You can change your finances.

All you have to do is listen to Rachel. Thank you. Okay. Rachel, you are fantastic. I love you. I'm so happy that you came on the show today. I'm so, well, I can't really say that. I'm so happy that you shared this with me.

It's not a fun topic, but it's a topic that we need to talk about. And we haven't covered this on the show before. There are people who are in a relationship wondering what they should do. And I like that you tried to fix it. I like that you went to therapy and did what you could do to try and make it work. And it became apparent that it wasn't going to work. So, okay, then we need to separate. We need to get a divorce.

And this is what happens when you get a divorce. And it's not always pretty. If you are thinking about getting married, listen to episode 301 and talk to your partner about a pre-up. It isn't a plan for a divorce. a plan for how you're going to handle your finances. And it's also a way to protect both of you should the marriage not work out. Should somebody change? Should something happen? And like Rachel said, 50% of marriage is end in divorce. You need a plan to protect yourself. Well, I think that is a good place to end this episode. Rachel, thank you so much for your time today. Thank you.

Oh, Rachel, where can people find you? She is. Rachel Richards and you can find her at. Okay, so my Instagram is Money Honey Rachel and both of my books, Passive Income Aggressive Retirement and Money Honey are on paperbook, audio, and ebook on Amazon. And then lastly, we didn't talk about passive income at all, but that is what I am known for. So if anyone would like to download my passive income starter kit for free, I will give that for free today. So you can go to moneyhoneyrachel.com forward slash passive income to download that. Ooh, thank you. Listeners, if you need some passive income, Rachel is the queen. All right. Now that wraps up this episode of the Bigger Pockets Money podcast. She is Rachel Richards.

I am Indy Jensen saying we got a shake rattlesnake.